Preparation Before Starting Trading
The forex market is the global currency exchange market, valued at $6.6 trillion, capable of generating profits. However, the odds are against you, especially if you do not prepare and plan your trades. According to a Bloomberg report from 2014, several analyses of retail forex trading, including one from the National Futures Association (NFA), the industry’s regulatory body, concluded that more than two-thirds of forex traders lose money. This suggests that self-learning and caution are the two recommended approaches. Here are some strategies that may improve your chances of making a profit.
Diversification and Risk Limitation
There are two strategies that should be in every trader’s toolkit: diversification and risk limitation. Traders who execute several small trades, especially in different markets where the correlations between markets are low, have a better chance of making a profit. Putting all your money into a single large trade is always a bad idea. Explore ways to ensure profit in a trade that is already profitable, such as trailing stops, and limit losses using stop and limit orders. These strategies and others are covered in recommended books. Beginner traders often fall into the trap of focusing on how to win, but more importantly, they need to understand how to limit losses.
Be Patient
Forex traders, especially beginners, tend to become impatient if a trade does not go their way immediately, or if the trade enters a small profit and they wish to withdraw and exit with a small profit that could have been a larger profit with minimal risk using appropriate risk reduction strategies. In the movie “Any Given Sunday,” Al Pacino reminds us that “football is a game of inches.” This is also the winning mindset in the forex market. Remember that you will win some trades and lose others. As a beginner trader, you might try to assess more money earned compared to money lost after every approximately 30 trades. This gradual assessment will help you seek balance in trading, which very few beginner traders manage to achieve.
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Source: https://www.thebalancemoney.com/planning-your-forex-trade-taking-profit-1345116
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